A Dive Into Nasdaq's Q2 Earnings: They've Got The Beat!

The second-quarter earnings report from Nasdaq (NASDAQ:NDQ) brought out an enthusiastic thumbs-up note from Piper Sandler & Co.

The Latest Numbers: Nasdaq reported second-quarter net revenues of $846 million, a 21% year-over-year increase, with an annualized recurring revenue of $1.8 billion that was up 22% from the previous year.

Nasdaq’s GAAP diluted earnings per share of $2.05 was 41% higher when compared to $1.45 one year before. During the first half of the year, Nasdaq said it returned $579 million of cash to investors, including $410 million in share repurchases and $169 million in dividends.

Separate from its second-quarter earnings, Nasdaq stated it entered into an accelerated stock repurchase agreement (ASR) with Goldman Sachs & Co. LLC (NYSE:GS) to repurchase $475 million of the company's common stock. The ASR was entered into pursuant to the company's share repurchase program, under which $1.46 billion remained available as of July 21.

"Our divestiture of Nasdaq Fixed Income in the first half of 2021 allows us to further concentrate our resources on technology, analytics, ESG and market infrastructure opportunities in support of our broader strategic direction," said Ann Dennison, executive vice president and chief financial officer.

Piper’s Pit: Richard Repetto, managing director at Piper Sandler, rates Nasdaq as Overweight with a price target raised from $190 to $200.

Noting the company reported a “‘sizable’ top and bottom line beat,” he highlighted how its net revenues and adjusted operating earnings per share were above both Piper Sandler’s estimate and consensus, while its $392 million in expenses were $9 million below the analyst’s model.

“Solutions (non-trading) segment organic growth of 18% in 2Q21 was well above NDAQ's target range of 5%-7%,” he wrote. “Organic growth by segment was: Investment Intelligence (II) +22%, Corporate Platform's (CP) +20%, and Market Technology (MT) +5%. We note II and CP are running 3.4x and 5x above the midpoint of the NDAQ's medium term target growth rates, respectively, for those segments.”

Repetto added Nasdaq’s platform benefited in the quarter from an increase in listings by 203 companies, bringing total listings for the first half of the year to 499. Observing that elevated SPAC and direct listing activity is initially less profitable for Nasdaq, he added that if Nasdaq could “pick up the listing when a company is merged with a SPAC, then NDAQ is able to realize incremental profitability vs. the original SPAC listing.”

Looking forward, Repetto predicted the company’s Tuesday announcement to spin out Nasdaq Private Markets as part of a new joint venture with Goldman Sach, Citigroup (NYSE:C), Morgan Stanley (NYSE:MS) and SVB Financial Group (NASDAQ:SIVB) “will enable the company to focus more resources on higher growth areas of its core business, while leveraging strategic partnerships to grow the private markets platform.”